Interest Rate Swap Scandal Timeline

The Sunday Telegraph reports that one of the Big Four banks is poised to double its provision for the mis-selling of Interest Rate Swaps with another of the Big Four set to treble it. One “Senior Banking source” has suggested that the Big Four will need to at least double their overall compensation provision to £1.5bn.

21st December 2012

RBS have been successful in its first High Court law suit brought against them for the IRS scandal. The two businessmen who had commenced proceedings against RBS in May 2011 for alleged mis-selling had their claim dismissed. The Court made it clear though that the outcome was “fact specific” and may not have an impact on other cases. It will not affect the FSA review of interest rate hedging products.

10th December 2012

Two businessmen in a property partnership concluded their claim against RBS on Friday following allegations that they were sold an interest rate swap attached to a business loan without having the full consequences explained to them. Details of the claim have not been released to the public but it is believed that judgment will be handed down before Christmas

7th December 2012

Which? reported today that following investigations, it banks are still selling IRS agreements as almost two-thirds of banking staff have unnecessary pressure placed upon them to reach their financial targets

28th November 2012

The Daily Telegraph has today reported of a complaint by a North-East businessman into the conduct of Clydesdale Bank and Yorkshire Bank who have called in a £3.8m loan with breakage costs of £1.2m despite allegations that they mis-sold him the product.

25th November 2012

The co-founder of a Michelin starred restaurant in London, Hakkasan, has started a revolt against RBS for what he claims is a mis-sold interest rate swap agreement, an arrangement he claims he did not want

21st November 2012

Guto Bebb, the chair of the all-party Parliamentary group investigating the interest rate swap scandal, has accused HMRC of being “less than sympathetic” with companies who are involved. He stated in correspondence to HMRC that “it is very concerning to see that HM Revenue & Customs appears intent on pushing businesses that might well be eligible for redress into administration.”

14th November 2012

Barclays and RBS have agreed to suspend swap payments for some SMEs who are in “financial distress” until the FSA-led review has been completed

12th November 2012

The all-party Parliamentary group tasked with investigating the IRS scandal has demanded a meeting with the FSA on 13th December 2012 at 12pm to re-assess the FSA’s role in the review of the scheme.

12th November 2012

Writing in The Times, John Cridland, head of the CBI, states that banks should be protected from law suits in relation to the selling of products linked with LIBOR. Guto Bebb, the chair of the all-party Parliamentary group investigating the scandal, describes this as “bizarre”

5th November 2012

At a hearing before a Parliamentary Committee on Banking Standards, the CEO’s of Barclays, HSBC and Santander sought to justify the continued selling of IRS products to SME’s, claiming there was a need for SMEs to have access to them.

1st November 2012

Clydesdale Bank and Yorkshire Bank have reportedly set aside just under £50m for compensation for mis-selling interest rate swap schemes. It is unclear whether they consider that this will be sufficient, their CEO stating that “it is still early days”

29th October 2012

Barclays attempts to adjourn the claim brought against it by Guardian Care Homes have failed today at a hearing in the High Court. Barclays Bank attempted to argue that the case should be adjourned until after the FSA-led review but the Court denied them this. Importantly, the Court has ordered that the case must go to trial and that Barclays will have to release, by way of disclosure, some sensitive material about who has been involved in the LIBOR fixing scandal. The trial is scheduled to take place next October. This is an important interest rate swap claim as it is the first real test case in this area. It is believed that there are in excess of 40,000 IRS arrangements and so there will be many people watching the outcome of this claim with interest.

26th October 2012

It has been reported that Santander has set aside £232m for compensation in IRSA claims

25th October 2012

The Financial Ombudsman Service has overturned two previous decisions in IRS complaints. The two unnamed banks have been ordered to pay compensation to two unnamed complainants, one such compensatory package is likely to be in excess of £500,000

23rd October 2012

Guto Bebo, MP, has set up a cross-party Parliamentary group to consider the mis-selling of interest rate swap products. Calling itself the All-Party Mis-Selling Group (APMG), it will be investigating the actions of the banks and reviewing ways to compensate affected SMEs

7th October 2012

The CEO of Barclays Bank has stated that a team of 300 staff has been set up to investigate the mis-selling interest rate swap claims

1st October 2012

The FSA has revised its original estimate of 28,000 businesses affected by the IRS mis-selling claims to 40,000 which an estimated compensation level of £10bn

19th September 2012

The Daily Telegraph today reports on the disturbing results of a survey carried out by the Economic Intelligence Unit which suggests that 84% of bankers are more focused on immediate performance targets rather than the society at large

18th September 2012

It is understood that, sometime last week, Sara Pearson, businesswoman, settled her Interest Rate swap mis-selling claim against Barclays Bank. She claimed that Barclays approached her with the opportunity of investing in the scheme and that she relied upon them for advice. It is likely that the parties will have entered into a confidentiality agreement so we do not know the details but in her Particulars of Claim, Ms Pearson claimed the she expected to recover in excess of £228k.

16th September 2012

Guto Bebb, MP, has written to the FSA expressing his concern at the delay in the compensation procedure, saying he does not feel that the body has done sufficient to date to assist affected SMEs

14th September 2012

Although not linked to the IRS Scandal, a landmark decision has been made in the High Court in the case of Rubenstein –v- HSBC. Hiding behind its terms and conditions of business, HSBC claimed that it had not advised Mr Rubenstein about the financial products that he invested his money in. The Court disagreed. This will be useful ammunition in the interest rate swap claims as it is an argument the banks are repeatedly raising

4th September 2012

Although appointed only five days ago, the new CEO of Barclays, Anthony Jenkins, has already received correspondence from a group of 8 MPs, expressing their concern at the mis-selling scandal and Barclays failure to deal with it to date

21st August 2012

A potential blow to claimants in the IRS scandal came today from the Scottish Courts when a claim brought by Grant Estates Ltd against RBS was dismissed. The heartening point though is that the Court dismissed the claim as GEL was not considered a “private person” under the Financial Services and Markets Act. Rather the Judge urged the company to consider making a claim to the FOS.

13th August 2012

In what is likely to be the first test case in the IRS scandal, Barclays has filed its defence in a claim brought against it by Guardian Care Homes who plead a loss of £38m. In defence, Barclays denies that it gave advice, that GCH is no worse off by this investment and it was “sophisticated” enough to understand what it was investing in

6th August 2012

Following the announcements on 29th June, the Big Four banks have now revealed how much they have set aside for interest rate swap compensation claims. Barclays is the biggest hit with £450m. HSBC has put aside £157m and NatWest and RBS have set aside £157m.

28th July 2012

RBS’s Irish-based subsidiary has just agreed to pay out €30m to Dublin-based businessman, David Agar, as well as paying his legal costs which is understood to be in the region of €1m, in response to his claim for mis-selling an IRS scheme

24th July 2012

Under the redress scheme agreed on 29th June with the FSA, Barclays and the Lloyds group will soon be writing to affected investors in their IRS scheme. Allied Irish, Northern, Yorkshire, Santander, Clydesdale, Co-Operative Banks and Bank of Ireland have all voluntarily joined the FSA-led redress scheme

19th July 2012

It is understood that Barclays have invited Guardian Care Homes to adjourn the trial of their claim pending the outcome of the FSA-led review. GCH have refused.

18th July 2012

Clydesdale Bank and Yorkshire Bank are now being investigated by the FSA

6th July 2012

The Federation for Small Businesses in Cumbria and Lancashire have led a call for the immediate end to repayments on IRS schemes for SMEs

30th June 2012

Yesterday’s announcement has done little to assuage the worries of affected SMEs. Whilst they are happy that the Big Four accept in principle that the products were mis-sold and compensation needs to be paid, the general reaction is that allowing the banks to set up their own judge and jury on whether a claim has been mis-sold is a mistake. There appears to be no criteria set for determining whether something has been mis-sold or what the definition of suitable redress. Importantly, there is no timescale.

29th June 2012

The FSA has provided an update on the IRS mis-selling which may provide a useful foundation for the way forward: only time will tell. The gist of its update is that there has indeed been mis-selling with some very bad sales practices by banks which the FSA calls “serious failings”. This includes failure to provide information on breakage costs. The Big Four – HSBC, Barclays, Lloyds and RBS – have agreed that they will provide re-dress where mis-selling has occurred. They have agreed that they will provide re-dress to all non-sophisticated customers who purchased structured collars on or after 1st December 2001 and will review all other similar sales (except caps and structured collars). Importantly, they have agreed to cease marketing structured collars to ‘retail clients’. At the moment, it is estimated there will be approximately 28,000 customers affected by the hedging.

The agreement does appear somewhat lax in specifics and the devil will certainly be in the detail. The immediate criticism is that there does not appear to be a timetable here. We shall just have to monitor matters.

27th June 2012

The latest in the LIBOR rate fixing by Barclays has resulted in them being fined $450m (£290m) by the FSA. The LIBOR fixing has had a huge impact as many loans and deals were based on this rate. In fact, any mis-selling of hedge funds based on the LIBOR rate will have a second prong to the attack.

This is the largest fine issued by the FSA

21st June 2012

The Law Society Gazette has obtained copies of the Particulars of Claim and Amended Defence in the case of Sara Pearson –v- Barclays Bank which is due to be heard in October 2012. Ms Pearson alleges that she has suffered losses in excess of £228,000. She alleges that Barclays approached her ‘unsolicited’ and led her to believe that the product was ‘low risk’, would ‘protect her business’ and was ‘suitable’ for her. Barclays deny that they provided any advice to Ms Pearson, that she was given opportunities to consider the options and that she was a ‘sophisticated’ investor. This will be one to watch.

21st June 2012

A House of Commons debate has taken place, headed by Guto Bebb, MP, about the mis-selling scandal. The sub-heading in today’s DailyTelegraph article is “Britain's biggest banks have been accused by MPs of orchestrating the systematic mis-sale of complex interest-rate swaps to thousands of businesses across the country.”

20th June 2012

After months of speculation, the FSA have finally agreed to launch an investigation into the interest-rate swapsmis-selling scandal. Its investigation will concentrate on the Big Four as it is believed that they are responsible for approximately 95% of the sale of these products.

18th June 2012

A debate is scheduled to take place in the House of Commons on the mis-selling of the IRS

16th June 2012

Leading Labour ministers are reported to have written to the CEOs of the Big Four, urging them to cease foreclosures on businesses that have been affected by IRS mis-selling.

15th June 2012

An astounding statement has been made by Barclays’, Bob Diamond. Only a week ago, the official line from Barclays was that the mis-selling accusations were “completely without merit”, yet now, Bob Diamond is openly admitting that “I can guarantee you in some cases we have made mistakes.” He went on to say that if they have made a mistake, they will “own up to it … and fix it.”

9th June 2012

Hotelier, Manit Limratana, is bringing court proceedingsagainst HSBC for losses in excess of £100,000 following their purchase of a derivative in his name without his permission, he claims. The swap was subsequently broken but it cost Mr Limratana £118,460 in breakage fees for which he now claims.

31st May 2012

The case of Grant Estates Ltd –v- RBS continues. GEL’s claim centres around the main issue of whether RBS can hide behind its terms and conditions of business where it states it will not advise when, as Iain Mitchell QC, Counsel for GEL, claims that in reality, they were providing advice on the ground. GEL lost approximately £135,000 in breakage costs which resulted in the company going into administration which it now seeks to challenge. We await the verdict.

30th May 2012

Grant Estates Ltd has brought proceedings against RBS in the Scottish Court of Sessions where they claim they were mis-sold derivative product which was entirely unsuitable. Alistair Clark QC, Counsel for RBS, claimed that the bank were merely “salesmen” and did not owe any duty of care for the information given. The case continues.

28th May 2012

It would appear that Unitech Ltd, an Indian property developer, has filed a counterclaim in proceedings brought against it by Deutsche Bank AG. Deutsche Bank AG accuses Unitech Ltd of failing to making payments of $11m under a swap contract in what was a $150m deal. Unitech are counterclaiming that the swap was not suitable and was not explained properly. They claim damages which will expunge Deutsche Bank AG’s claim if successful.

16th May 2012

The Daily Telegraph has reported that Labour has launched an investigation into the alleged mis-selling scandal of interest rate swaps. It is hoped that they can bring about an alteration to the Financial Services Bill which will allow affected SME’s to bring a class action against lenders.

5th May 2012

The Daily Telegraph is today reporting that the FSA is considering a major investigation into the banks’ involvement in the IRS selling schemes. .

3rd May 2012

Business Secretary, Vince Cable, has announced that he will be keeping “a very close eye” on what could prove to be the biggest mis-selling scandal since PPI. He confirmed that he is working with the FSA and the Treasury.

29th April 2012

The Daily Telegraph is advising that Guardian Care Homes Ltd which runs a chain of some 30 care homes, has recently obtained a review report by JC Rathbone Associates on the losses arising from derivatives GCH purchased. JC Rathbone Associates conclude that there was a “reckless disregard” by Barclays as to the suitability of the option for GCH. The report will form the basis of GCH’s compensation claim against Barclays which was issued in the High Court four days ago.

16th April 2012

Barclays has announced that is has made a serious error in its sales pitch for hedging products by some SMEs by showing a presentation which was more suitable to “investment professionals”.

15th April 2012

The Daily Telegraph reports that the interest-rate swap scandal could hinder the restructuring of the banks which may then have a snowball effect on the economy.

25th March 2012

Just weeks before the trial, Barclays Bank has paid unstated compensation to Wand Property in a surprise climb down by the bank. They had consistently stated that they had not been negligent in selling the hedging product sold to Wand. The trial was due to start on 16th April but this settlement means that we will be deprived of judicial clarification on the banks’ liabilities.

22nd March 2012

In a surprise decision, the German courts today ordered Deutsche Bank AG to pay compensation to Ille Papier Services €541,074 (£472,000) plus interest for the mis-selling of a derivative. It is understood that Deutsche Bank AG faces another 25 similar cases so it will be interesting to see if they try to settle them in light of this decision.

11th March 2012

The Telegraph publishes a front-page article entitled British banks hit by new mis-selling scandal which starts the investigation into the possible mis-selling of the products.